Richards Layton & Finger
 

What To Do About Informational Conflicts Involving Designated Directors

April 2011

Delaware case law has long discussed the directors’ fiduciary duties of care and loyalty to the corporation and its stockholders in absolute terms. An often-cited passage from the Delaware Supreme Court describes:

“A public policy, existing through the years, and derived from a profound knowledge of human characteristics and motives, has established a rule that demands of a corporate officer or director, peremptorily and inexorably, the most scrupulous observance of his duty, not only affirmatively to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers. The rule that requires an undivided and unselfish loyalty to the corporation demands that there shall be no conflict between duty and self-interest.”